July 7, 1998

Greetings again!! Welcome to the second edition of Banking Connections from the BCS Marketing Department. The second quarter of 1998 has come and gone, and all I can say is: WHEW!! I have been involved with the financial services industry for almost 30 years, and I cannot recall a 90-day period of such hectic activity. It was like sharks on a feeding frenzy. In one week’s span we had several of the largest merger and acquisition deals ever announced. First there was the $70 billion union of Citicorp and The Travelers Group that creates a truly global diversified financial services behemoth.

While the market was still dazed by this powerful merger, it was followed closely by two others being announced from New York’s Waldorf-Astoria at the same time. Taken alone, the $30 billion merger of Banc One Corp. with its Midwestern neighbor, First Chicago NBD Corp., would seem pretty big, creating the country’s sixth-largest bank, with assets of about $240 billion spread across 14 states.

However, down the hall, NationsBank and Bank America were touting their $60 billion transcontinental marriage. Talk about upstaging!!

If that wasn’t enough, Norwest announced its take-over of embattled Wells Fargo, Banc One completed its acquisition of Louisiana-based First Commerce Corp, and Union Planters of Memphis made moves into Florida and Missouri. Star Banc of Cincinnati is becoming a major player in Kentucky through its acquisition of Trans Financial Inc. of Bowling Green and is also moving north with its recent deal to take over Milwaukee-based Firstar.

It wasn’t just the big guys making all the moves. Georgia’s Flag Financial Corp. has been on a nine-month buying spree. Flag, based in LaGrange, announced the first

merger deal in its 12-year history last October, when it agreed to combine with Middle Georgia Bankshares of Unadilla. Since then, the $425 million-asset company has announced plans to buy four other banks in central and southeastern Georgia. In fact, in the first half of 1998, banks with less than $3 billion in assets have been targets in almost 200 merger announcements, about 15% ahead of last year’s pace. About the only deal that did not get done was Bank of New York’s failed assault on Mellon Bank.

However, these merger announcements may not have been the most significant news in the financial services industry. While Hugh McColl of NationsBank was claiming to have created the country’s first coast-to-coast bank, two little banking companies based in Atlanta had already trumped him in that regard. Both Atlanta Internet Bank and Security First Network Bank have long had customers from all 50 states. I think one of the most meaningful news stories came from Atlanta Internet Bank.

Although not making the headlines of the multi-billion dollar deals, Atlanta Internet Bank announced its first profitable quarter this past quarter, and it is barely a year old. Deposits at AIB have increased over 185% in 1998, and shares of AIB’s parent company, Net.Bank, are up over 150% this year. As further validation that the Internet is a valid financial services delivery channel, Security First Network Bank saw its stock price increase over 70% during the second quarter, making it one of the leaders for Georgia’s publicly traded companies and is up over 106% for 1998. SFNB has sold its banking charter to Royal Bank of Canada and will metamorphose itself into an Internet financial services software company, Security First Technologies, in August. A mysterious, yet-to-be-named financial services organization has made a $10 million investment in this new entity. A more in-depth look at Atlanta Internet Bank is part of this issue of Banking Connections.

Keep your eyes on these two similar, yet distinctively different, organizations as models for new ways of delivering financial services to the marketplace.

In banking these days, size is a big deal. The huge values and rapid pace of the mergers now sweeping America’s financial services industry are the evolutionary results of the consolidation that started more than a decade ago. As in-state banking turned into regional banking and then into super-regional banking, the drive was for cost savings and for efficiency. Now, what we are seeing is major stakes race to build empires that can ramp up revenue while having the geographic and customer diversity to withstand local economic downturns. Stay tuned, I am sure there is still more to come.

As a parting thought, NationsBank has announced a major acquisition over Labor Day weekend for three years in a row. I wonder what news will be coming out of Charlotte this September??? It seems to me that there is a geographic void in their franchise in the Northeast, where their cross-town rival First Union has already staked out a nice network. If I were BankBoston or Fleet Financial, I would not make any holiday plans just in case the phone rings!!!

I hope you find this newsletter useful, and I look forward to any feedback that you may care to offer. Contact me by Lotus Notes or e-mail me at calvin.d.johnson @bridge.bellsouth.com. Better yet, pick up the phone and call me at 404-728-7285. I look forward to working with you and your customers in the future.

Happy Reading and Good Selling!

BANK TECHNOLOGY

INVESTMENTS

How Does A Bank Strike A Balance Between High Tech and High Touch?

This is an exciting time in banking and technology. Breakthroughs like those discussed at the last Retail Delivery Systems conference by Bill Gates of Microsoft Corp. and Lew Platt of Hewlett-Packard Co. painted a vivid picture of what can be. More and more, it is becoming apparent that the real name of the game in banking today is profitable revenue growth. The important focus is now on how technology serves that goal, and this article will describe some of the critical components of that process.

Bank executives around the world are all challenged with aggressive growth plans -- 12%, 15%, 18%, 20% a year. It is in that ambitious context that bankers have invested so heavily in information and technology. The results so far are mixed. On the positive side, according to the Department of Labor, in the third quarter last year U.S. workers' productivity showed the biggest gain in five years. Technology investments may have finally begun to show results.

The bad news is we cannot correlate spending on information and technology with greater profitability. The technology survey report by American Banker and Meridien Research confirmed "there is little agreement about the impact of this technology spending ($50 billion in 1997) on the banking industry's profitability."

If this were football, we would be in the red zone -- within 20 yards of scoring a touchdown. In other words, when it comes to investing in bank technology we have made significant progress. We have traveled almost the full length of the field and have a few critical yards to go. One thing to keep in mind is that when you get to the red zone, expectations rise. Investors and analysts expect that if we have gotten this close, we ought to be able to score -- to show more profitable revenue growth.

However, the yardage gets tougher in the red zone. Acquiring the information and technology has been a significant accomplishment. The endgame is harder. It involves skills that most simply do not have today. To succeed, we will have to develop what is called "market competence" -- the ability to use information and technology to get the right sales and service through the right channel to the right customers at the right cost.

Acquiring the new competence involves three requirements.

First: Technology must seem valuable to the customer. The press paints a mixed picture of customer value. We can point to advances like personal computer banking, home banking, Internet banking, voice response units, telephone service centers, credit scoring systems. But when we listen to customers, it is clear they see things differently.

Here are some of the dichotomies:

We say our new technology lowers the cost of transactions. But customers ask why, if costs are lower, they are seeing more and higher fees. We say our new data warehouses and data mining tools let us send very specific direct mail with specific messages tailored to the right customers. They say they are flooded with mail, most of it junk that doesn't bring value. We say our new phone centers let us contact customers with messages tailored to their next needs. They complain about getting too many calls from people who clearly don't know who they are or what they value.

Customers are investing more money in caller ID and call blocking than we are in targeting them. We say our new segmentation technology lets us deliver very specific value propositions, exactly fitted to specific types of customers. They wonder why, when they come into a branch and then do business with the phone center, the value proposition can't follow from one "silo" to another. We say technology lets us remove some of the human factor so that we can offer a more consistent approach to the customer. But customers say the last thing they want is a less inspired, less able, less knowledgeable, more programmed response to their needs.

So customers are pushing back. According to American Demographics, "U.S. corporations now lose half of their customers in five years, half of their employees in four years, and half of their investors in a matter of months." We are talking about a very transient group that obviously does not see sufficient value to warrant lifelong relationships.

There is more at stake here than losing wallet share. What happens when we also lose access to customers? If we are going to score from the red zone, we need to take the information and technology that add value for us and make sure they also add value for the customer.

Which brings us to the second requirement: Technology must become a major competence for the organization. To create value, it takes better information about customers and better ability to analyze the information. And it takes more channel options to give customers more variety, convenience, and flexibility. These are areas where banking shows progress. So in this respect we are well prepared for the next level of success. But there is a gap. Peter Drucker, noted author on management and organizational behavior issues says, "Information develops rapidly; competence develops slowly." If we are really going to see a different outcome, we need to do things differently, and that means a new level of competence.

In "The Future of Banking, Part II," the former Donaldson, Lufkin & Jenrette analyst Thomas K. Brown delineated the three traits that will set successful organizations apart from the rest: "They will have engaged employees; they will operate with a clear vision that is understood throughout the organization; and they will be leaders in sales and marketing execution."

How do we make sure we have engaged front-line employees who have a clear vision and are able to execute? Robert Benson, professor of information management at Washington University, said in Information Week, "It's what the organization does to use information and reach out to customers that counts. The purpose of IT (information technology) is to change the behavior of its users to better achieve their business objectives." But for most banks we work with, if the mission of IT is to change behavior, the current capability of IT is really just to change the technology. A crucial question is, Who is in charge of making sure behavioral change actually flows out of the new information and technology and winds up as value for the customer? Most banks have not established this accountability.

Which brings us to the third requirement: Technology must enable new behavior. It must help individuals think differently, make different decisions, behave differently. Market research shows that the average front-line banker makes 25 to 40 decisions a day: to waive a fee or not, to refer a customer or not, or to profile a customer or not. The incriminating fact about all our technology spending is that it has rarely changed the actual behavior that matters to customers. Decisions that matter to customers (and the bank) continue to be made independent of our new data warehouses, mining tools, and decision support systems.

Banks have demonstrated competence in managing transactions. They have the necessary operating systems and can track where a transaction enters, where it goes, how it is handled, and where it ends. But there is no system or process for all those critical 25 to 40 decisions. What banks need is an operating system for customer optimization. It would absolutely ensure that in every market and in every instance, the front-line banker would know exactly what value proposition would be most meaningful for the customer and the bank -- and would also have the skills, judgment, and tactics to make the value proposition come to life.

This operating system involves a new category of technology -- not the kind that justs facilitates transactions, but technology that enables behavior that matters to customers. Reaping technology's reward means conquering a new challenge for banking, melding the formerly separate worlds of technology and behavior. There was a time when most assumed technology was the answer. Then we learned it is not technology, it is behavior. And now we have come full circle, closing the loop. It is still behavior, but it is technology-enabled -- a brand new kind of technology.

CALL CENTERS IN BANKING

How Can Banks Profit From These Technology Investments?

As bankers attempt to serve more and more customers through lower cost delivery channels, millions of dollars are being invested in call center technologies. Measurement of the return on these investments remains somewhat elusive, and lessons are just starting to be learned concerning the Do’s and Don’ts in call center design and operations. Let’s explore some of these issues.

In an industry defined by the paradox of missed expectations and ever-higher goals for call centers, PNC Bank may well provide a glimpse of the promised land.

The 1,000-person National Financial Services Center near the company's Pittsburgh headquarters handles 150,000 calls a day (about 70 percent of those within the voice response unit), supports more than 300 products and services and is fast becoming multi-media-capable for everything from 800 daily fax inquiries to urgent electronic mail.

The center, which opened in 1995, was preceded by a $400 million investment in a single platform and data center. Today, the company is able to extend its reach far beyond the Alleghenys. "The motivation was to provide a platform and a central site where we could make the kinds of investments that were required to have a world-class center and to be able to manage and measure it in a way that made sense,'' says Joseph Guyaux, CEO of PNC Bank's regional consumer bank, which includes the call center. "And [PNC plans] to use that platform to leverage our reach where we would not be limited just by physical buildings."

But PNC is clearly an exception. Experts say that the good news is that after years of fumbling with how to pull together once disparate call centers, bankers are integrating every point of customer contact. The bad news is that most are not ready to capitalize on sales opportunities.

Recent studies have shown many bankers are disappointed because their costs did not drop as they had hoped when they made 24-hour access available. "We've seen that single channel users have been converted into multi-channel users,'' says James B. Moore, president and CEO of Mentis Corp., the Durham, NC-based research firm which has studied bankers' expectations of their call centers. "When you make it more convenient for consumers to transact, they transact more often.''

That lesson is why Moore is convinced that bankers will strategically invest in the call center as the point of integration for all channels--and the launch point for cross-sell efforts. The Tower Group forecasts that spending by bankers alone will top $500 million by 2001. Other experts predict that number will reach $1 billion when all other areas of financial services--from specialty finance companies to insurers--are included.

And experts say the real return on investment will come when financial services companies are able to turn every contact with the customer into a customized sales opportunity. Virtually no one is at that point today. Moreover, they say that most companies have cultural hurdles to

understanding how to measure their return and few are equipped to deal with a fundamental change in the customer relationship. "Most of us never go into a physical outlet today. We deal with our banks through the PC or on the phone.

There is no personal relationship,''

says Deborah Ingram, head of the financial services group at AT&T Call Center Solutions. "If I can't have a personal bond, what I have to do is emulate a personal relationship through the kind of information that helps me really know that customer."

Ingram says that direct channels change both the speed of service and who is in control. "When you have physical branches, you control

the speed of the way I choose to deliver service. When you move to electronic methods, you shift control to the customer and many aren't prepared for that,'' she says.

Mentis' research shows that 71 percent of the largest institutions plan to integrate all their delivery channels through the call center. To do that effectively, Moore says bankers will need to emphasize specialized call center agents to handle specific calls and technologists will need middleware that makes intelligent call routing automatic. "This will be the backbone of the delivery system because it embraces people,'' Moore says. "People sell and people service."

One key indicator of call center performance potential is whether customer service representatives are equipped to respond to calls through the use of tailored scripts. Mentis found that scripting is widespread among institutions of all sizes, but that 62 percent of those scripts were based on product ownership. About one-quarter of those surveyed said they customized the script by segmentation criteria such as age. A scant 8 percent said they based such sales efforts on usage patterns--a practice which experts say

should be more widespread as information systems make it possible to track product usage across all channels.

Beyond separate projects to build their data warehouses, financial services companies are also focused on enhancing the connectivity of the call center. In this high stakes chase for solutions, Moore boldly predicts that the technology providers which solve these problems will dominate banking technology. "This will be the intelligent point for handling the customer across all points of the enterprise. This will be a strategic high ground for a vendor. The vendor who owns that high ground, like IBM twenty years ago, will own all that flows from it,'' says Moore. "The shakeout is driven by the move from client/server architecture to network-driven architecture. This is the paradigm of choice."

But understanding the profitability of the call center also depends on the ability to measure its contribution to the bottom line. Customer activity is still credited to the branch--not the channel which actually sold a product or service. Bankers concede a need to shift measurements so they really know what works.

Larry Wilson, chief administrative officer of Norwest Bank of

Texas, says that profitability is still tracked at the branch level even after the superregional opened a Texas-only call center in Lubbock last fall. His solution is to not scrap the current system, but rather set up a specialized system of allocating costs and revenues at the call center. "We have found that this is a common problem,'' he says. The lack of measurements is a residue of bygone days when the role of call centers was viewed more narrowly.

"Years ago, call centers were just the back up to the branch offices. They were really there for the overflow,'' says Bob Sverak, vice president in the call center group at Charles Schwab & Co., which handles 400,000 calls a day through its four operations centers. "Today, we are the service arm of our branches, of the company."

More fundamental is how call centers are working toward

the goal of making a sales effort with every customer contact. "The issue for most is how to turn the inbound call center effort into a sales opportunity,'' says Tom Bolleum, CEO of Anytime Access, which provides call center outsourcing for more than 200 institutions. "When someone has taken the time to call you, when it is convenient for them, you want to be ready to make the right offer. That is a dramatic shift for most banks.''

The same is true for insurance companies. Nate Natraj, vice president and general manager of the financial services division at Scopus, says that most insurers are only now offering term life through a

direct sales effort in response to non-insurance competitors.

Change does not come easily for an industry whose beginnings were of agents selling policies door-to-door.

"Families don't want an agent sitting at their kitchen table hounding them,'' says Ted Fortezzo, director of insurance and finance at Telespectrum Worldwide Inc. in Omaha, NE. "Insurance companies need to give consumers the ability to buy whatever they want the way the want to buy it because the consumer is getting smarter."

That reality has forced insurers to adjust and has created strong demand for companies which understand direct sales. Last year, companies such as Colonial Penn Insurance Co. were acquired for a premium nearly double that of traditional insurers. Carmel, IN-based insurer Conseco paid $460 million for Colonial Penn.

Conseco chairman Stephen Hilbert says the acquisition moves beyond simply buying the customers and capabilities of Colonial Penn. Instead, he says the challenge is to automate sales, service and customer information across diverse--and sometimes competing--channels.

Under his model, if the direct sales effort fails, the household can be referred to a subsidiary which can attempt a sale through direct mail, or possibly to one of the thousands of local independent or staff agents who can try a face-to-face sale.

"We have to be able to take advantage of all of those possibilities to build our sales,'' says Hilbert.

INTERNET BANKING UPDATE

Good For Customers, Good For Investors!!

As mentioned in the Editor’s , despite all the hub-bub generated by the mega-bank mergers last quarter, Internet Banking has continued to progess towards becoming an accepted delivery channel for financial services. Here is an inside look at a successful Internet Banking venture.

When Atlanta Internet Bank opened its office in Alpharetta, Ga., two ladies came in to cash a check.

An employee obliged, but D.R. Grimes said, "Don't tell anyone."

The vice chairman and chief executive officer of Net.Bank, the holding company for Atlanta Internet Bank, preferred that they spread the word about the on-line service that was the institution's main reason for being.

Net.Bank was incorporated in 1996, and the bank opened in 1997 under the charter of one of its owners, Carolina First Bank. That was a year after the one often called the first Internet bank, Security First Network Bank, opened in Atlanta. Atlanta Internet, like Security First, eventually received its own federal savings bank charter.

Unlike Security First, which was described as a "proof of concept" for technology marketed to other banks, Atlanta Internet wants to be just what it is, and Mr. Grimes represents a management team deeply rooted in conventional banking systems.

"I am never too impressed with the development of technology for its own sake," said Mr. Grimes, 51, who worked for Trust Company Bank, now part of SunTrust Banks Inc., for 12 years as manager of computer systems and programming. He also served as executive vice president of Servantis Systems Inc., the Atlanta software company acquired by Checkfree Corp. in 1996. He said the background gave him an appreciation "of banking as an industry and its importance to people in this country."

Atlanta Internet Bank is one of four all-electronic banks enticing customers away from traditional banks. It followed by a year on the heels of Security First Network Bank, an Atlanta-based on-line bank whose Security First Technologies unit develops and sells on-line banking software technology to other banks. Security First recently agreed to be acquired by Royal Bank of Canada.

TeleBank, which has been operating as a telephone-only bank out of Arlington, Va., since 1993, went on-line in March, and in July a Houston startup called CompuBank is expected to launch.

Customers are lured by the high yields paid on savings and checking accounts, money market accounts and certificates of deposit, low interest rates on loans and mortgages, lower monthly fees, and the convenience of on-line banking. On-line banks say they have a leg up on traditional banks because they have fewer overhead expenses.

"The cost savings from not staffing and maintaining buildings is so significant that we can share our profits with our customers and investors, says D.R. Grimes, Atlanta Internet's chief executive officer.

By comparison, Mr. Grimes says that a bank the size of Atlanta Internet, which has $230 million in assets and 22 employees at its sole location, would operate six to eight branches and would employ an additional 30 employees. While the bank's 3% net interest margin -- a bank's measure of profitability -- is lower than a typical bank's 3.75%, Mr. Grimes says that because of lower expenses the bank is actually twice as profitable.

Non-interest expense as a percentage of earning assets -- an indication of overhead expenses -- runs about 2.8% at Atlanta Internet, Mr. Grimes says, versus the 4.1% average that the Federal Deposit Insurance Corp. says is typical of banks of up to $1 billion in assets. Today, AIB has about 12,000 active accounts and $170 million in deposits - a number that Mr. Grimes expects to hit $230 million to $260 million by the end of the year."Internet banking was an incredible breakthrough," said Mr. Grimes. "In the past year and a half we have proven beyond doubt that the Internet is a successful medium to deliver banking. It can be profitable and opens up an enormous market."

Like most Internet start-ups, the bank has room to grow. It lost $5.6 million last year but had no earning assets before summer. Recent announcements have shown that AIB is well on the road to profitability.

Net.Bank fields an average 1,200 e-mails a week and opens 200 accounts on-line. The biggest drawback of the Internet channel, Mr. Grimes said, is the lack of a true application form. "I would still like to see us streamline account setup," perhaps relying on digital signatures, he said. "It's not like buying a book, a two-minute thing. We're asking people to entrust us with their money."

The Internet is also the preferred advertising medium. "It is cheaper to take an Internet customer and make him an Atlanta Internet Bank customer than to find someone and teach them how to use the Internet," Mr. Grimes said. "I believe we've done more marketing on the Internet than any bank anywhere -- at least of this size."

Working with the agency K2 Design Inc. of New York, Atlanta Internet has been advertising extensively since November. Its banner ads appear on about 40 Web sites, including those of Microsoft Investor, Money Magazine, Motley Fool, and Weather Channel.

"The numbers we have indicate that in November the bank was getting 400 new customers a month, about 10% of its installed base," said George Kivel, director of research for Mainspring Communications Inc., a new Internet consultancy in Cambridge, Mass. "Since the advertising campaign, Atlanta Internet Bank is getting about 800 new customers a month, a little more than 10% growth."

The analyst estimated the bank was spending a high $180 per acquired account, but the average account balance exceeds $15,000, and it is a savvy demographic, Mr. Grimes said. The average Atlanta Internet Bank customer is 40 years old; a manager, professional, or technical person; has an annual income over $60,000; and owns a home.

The bank offers the common range of deposit and savings accounts, overdraft protection, mortgages, other loans, and a Visa check card. Credit cards will be launched this summer. It relies on Nova Corp. for check clearing and statement production. Uvest Investment Services has sold Net.Bank the rights to "private-label" its Internet brokerage service. In the past month, Mr. Grimes said, the bank added the "twist" of allowing securities to be purchased by debiting a checking account.

Net.Bank does all this with less than 30 employees, of which about 10 are in customer service, handling customers in all 50 states plus about 100 from other countries. "We are the most national of national banks," Mr. Grimes said. "We believe the one thing that can differentiate us from the huge, monolithic banks is customer service with a personal touch."

Because much of the operation is outsourced, chief technology officer Tom Cable must manage external relationships to keep service levels high. Bisys Group Inc. handles the account processing portion of the Web site, and AT&T is the Web host for marketing purposes.

Checkfree Corp. processes electronic bill payments and ultimately will provide a bill presentment service. Edify Corp.'s Electronic Banking System is the Web banking platform.

J. Robert Jones, senior vice president of business development at Bisys, is also a stockholder in Net.Bank and a friend of the founders. "The concept is great, the service is wonderful, and it's always as close as your terminal," Mr. Jones said.

Mr. Grimes said he was pleased that Security First is being sold to Royal Bank of Canada, because it competed for attention with Atlanta Internet and lost money, which made it "difficult for people to understand how we could make money."

"The key to being successful is to take our cost advantage and give our customers higher interest rates on savings and our shareholders higher profitability," Mr. Grimes said. Future revenue opportunities could come from selling on-line mortgage application software to brokers and from establishing a partnership with a travel planner to serve customers over the Internet.

Mr. Grimes sees his strongest competitors as on-line brokerage firms, though other Internet banks are expected to open in the next few months. He points to Charles Schwab & Co. as particularly "willing to experiment, test the limits, and offer the strongest approach to complete financial management from the customer's point of view."

But he added, "you don't have to be huge to be successful."

"We have the opportunity to cross-sell more than in a physical branch, and we don't have to deal with the distribution of products and services to branches," Mr. Grimes said. On the Internet, "the customer is directly in touch with his banking records, and there is no middle man."

Wall Street has rewarded the concept of Internet-only banking. Shares of Atlanta Internet traded as high as $31 a share in late April, nearly triple the $12 a share price of its initial public offering that raised $35 million last July. Its shares traded in the high twenties most of the second quarter.

Although the bank reported a two-cent a share loss for the first quarter ending in March of this year, Atlanta Internet says it had its first profitable month in March. And Christopher Kelly, banking analyst for Morgan Keegan of Memphis, Tenn., projects a four-cent a share profit on an operating basis for the second quarter of 1998. Mr. Kelly is equally optimistic about its future prospects.

"To make money on the Internet is no small feat," he says. "Although

Atlanta Internet Bank has an awfully big chore ahead of it, I think the day is coming when the Internet will be an accepted delivery channel for banking services."

Atlanta Internet's Mr. Grimes isn't deterred by any of the industry’s nay-sayers . "We're not a great bank for everybody," he admits. "But for customers who want high interest rates and low fees, who want to pay bills on-line and look at statements

whenever they want, we're a good bank. I'm convinced our customers come out ahead."

And so far, that fact has proven true both for AIB’s customers as well as for Net.Bank’s shareholders.

BITS AND BYTES

• Florida A&M finance professor Larry A. Frieder, in updating his book, BottomLine Banking, says the days of independence are numbered for many Southeastern regional banks.

Regions Financial Corp., SouthTrust Corp., Union Planters Corp., and Amsouth Bancorp are among 23 companies he believes are headed for takeover. His research shows a great deal of excess capacity in the banking industry nationwide, and that Tennessee and Alabama are particularly attractive markets for consolidation. Bank revenues are not large enough to cover expensesincluding necessary technology spending and keep shareholders happy. Other companies making Professor Frieder’s list of those headed for takeover include First Tennessee National Corp., First American Corp., Compass Bancshares, Hibernia Corp., Centura Banks Inc., and First Virginia Banks.

• In a recently published study titled "Transforming Consumer Banking Through Internet Technology," the Financial Services Practice of USWeb Corporation explores the growth of online banking and examines ways in which financial institutions can take advantage of Internet technology to offer

cost-effective banking solutions. In a study of 1,000 of the largest financial services companies in the United States, USWeb found that 93% of US-based financial institutions plan to deploy some type of Internet strategy within the next 3-5 years.

• Proving that you do not have to be a big fish to swim in the Internet ocean, the $170 million-asset Britton & Koontz First National Bank of Natchez, Mississippi not only offers its customers the ability to bank from home, it has also become an Internet Services Provider for its community. Not only does it give the bank an adjunct to its core business, it helps boost non-interest income while attracting home banking customers.

• National Commerce Bancorp of Memphis, which has built much of its consumer strategy around supermarket branches, has brought home banking to its customers on laptop PC’s. The $4.9 billion-asset company is demonstrating its new Internet banking software on laptop computers at its 109 branches in Tennessee, Georgia, North Carolina, and Virginia. Over 5,000 customers have signed up over the past few months, and new accounts are being opened at the rate of about 50 per day.

• Robert H. Lessin, a high-powered investment banker, is giving the nascent on-line financial services industry a major dose of credibility. Mr. Lessin, formerly Vice Chairman of Salomon Smith Barney, has joined Wit Capital Corp., a New York firm that is spearheading the effort to deliver investment banking and brokerage services over the Internet. Wit Capital, a two-year

LATE BREAKING NEWS

Japanese Banking Crisis Continues

According to inside contacts, the Japanese banking crisis shows no signs of ameliorating. If anything, it's getting worse.

Following last week's news that Origami Bank had folded, we are hearing that Sumo Bank has gone belly up and Bonsai Bank plans to cut back some of its branches. Karaoke Bank is up for sale and is (you guessed it!) going for a song.

Meanwhile, shares in Kamikaze Bank have nose-dived and 500 back-office staff at Karate Bank got the chop. Analysts report that there is something fishy going on at Sushi Bank and staff there fear they may get a raw deal.